Essential Energy has been accused of scaremongering about the risks of bushfires and blackouts as it attempts to justify price increase demands.
Craig Memery of the Public Interest Advocacy Centre told a Senate hearing that he was concerned about the tactics being used by Essential Energy to try and strongarm the courts into overturning an Australian Energy Regulator decision to slash prices.
The Senate is currently debating a bill to narrow the grounds that energy companies can use to appeal such AER decisions. Federal energy minister Josh Frydenberg has argued the bill will strengthen the power of the AER and reduce gouging by network firms which are the biggest source of rising household power bills.
The hearing has heard that Essential and other electricity networks have lodged appeals that could result in households’ power bills rising by a total of $7.2 billion.
Essential Energy, which is owned by the New South Wales government – supplies electricity to 880,000 rural customers.
Bushfires and blackouts claim contradicted by memo
The company issued threats and warnings, saying that it could not guarantee supply and reliability of service due to fallen power lines if its demands for a 25% price increase would not be met. Essential claimed that there were risks of bushfires and blackouts this summer due to decreased revenue.
However, its arguments were exposed as a sham by Opposition Energy Spokesman Adam Searle, who obtained a memo sent my Essential to the New South Wales government in which it said that leaving prices as they are would have “minimal impact” on its business.
Chris Pattas, acting chief executive of the Australian Energy Regulator, told the hearing he could not comment specifically on the Essential case which is still in a court.
Bushfire claims part of “strategic behaviour” of concealment
He said many networks engaged in “strategic behaviour” which concealed from regulators how easily they could reduce costs to an efficient level. They then went to court to demand higher revenues to boost returns to shareholders. “We have seen examples where a lot of information came in very late in the piece that wasn’t able to be analysed,” Mr Pattas said.
Mr Pattas said that the threat of the Federal law change has recently resulted in the country’s 20 electricity networks not using the tactics revealed by the Essential memo. But, he said he was concerned that networks could return to their old ways.
Paul Italiano, chief executive of TransGrid, the biggest electricity transmission grid, told the committee he opposed changes to the appeals process and warned that it risked blackouts.
“Those that live in South Australia can testify to the disruption that happens when we get it wrong,” Mr Italiano said. He said that recent report in the media failed to take account of the engineering “needed to keep the lights on.”
TransGrid will be allowed revenue for the period 2018-2023 that is 8.4 percent or $360 million less than Transgrid’s proposal. If the bill is passed, TransGrid will lose many of its rights to appeal that decision.